Intro: "Nothing drives voter sentiment like the price of gas - now averaging $3.56 a gallon, up 30 cents from the start of the year. It's already hit $4 in some places. The last time gas topped $4 was 2008. And nothing energizes Republicans like rising energy prices. Last week House Speaker John Boehner told Republicans to take advantage of voters' looming anger over prices at the pump."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

The Gas Wars

By Robert Reich, Robert Reich's Blog

21 February 12

othing drives voter sentiment like the price of gas - now averaging $3.56 a gallon, up 30 cents from the start of the year. It's already hit $4 in some places. The last time gas topped $4 was 2008.

And nothing energizes Republicans like rising energy prices. Last week House Speaker John Boehner told Republicans to take advantage of voters' looming anger over prices at the pump. On Thursday House Republicans passed a bill to expand offshore drilling and force the White House to issue a permit for the Keystone XL pipeline. The tumult prompted the Interior Department to announce on Friday expanded oil exploration in the Arctic.

If prices at the pump continue to rise, expect more gas wars.

In fact, oil prices are rising for three reasons - none of which has to do with offshore drilling or the XL pipeline.

The first, on the supply side, is Iran's decision to cut in oil exports to Britain and France in retaliation for sanctions put in place by the EU and United States. Iran's threat to do this has been pushing up crude oil prices for weeks.

The second, on the demand side, is rising hopes for a global economic recovery - which would mean increased oil consumption. The American economy is showing faint signs of a recovery. Europe's debt crisis appears to be easing. Greece's pending bailout deal is calming financial nerves on both sides of the Atlantic, and the Bank of England and European Central Bank are keeping rates low. At the same time, China has decided to boost its money supply to spur growth there.

Neither of these would have much effect were it not for the third reason - overwhelming bets of hedge funds and other money managers that oil prices will rise on the basis of the first two reasons.

Speculators have pushed crude oil to $105.28 per barrel, up 35 percent since September. Brent crude, Europe's benchmark, is now $120.37 a barrel - also worrisome because many East Coast refineries use imported oil.

Funny, I don't hear Republicans rail against speculators. Could that have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

But that's okay. The gas wars may come to a screeching halt before too long, anyway. So many bets are being placed on rising oil prices that the slightest hint the speculators are wrong - almost any sign of expanding supply or declining demand - will set off a sharp drop in oil prices similar to the record one-day fall on May 5 of last year.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.

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Why do you hate America? America, the land of the free. America, home of the brave. Here you free to be a brave Hedge fund investor. Where you risk your hard earned dollars and instead of allowing those dollars to be taxed at a confiscatory 15% reinvest them in America. They invest in American's addiction to oil based products , and gas powered vehicles. Even though that addiction is making the air unbreathable, the water undrinkable and the climate unpredictable.

But that's the downside. These profitable investments take wealth away from the poor and soon-to-be poor and make sure the dollars go where they should. The job creators. People that hire other people, unless they send that money offshore to hide from the evil taxman. The evil taxman that would take that money and just give it back to those undeserving poor and soon-to-be poor.

Mr. Reich, why do you hate America? A country bubbling over with freedom and riches and opportunity for the richest to keep their money free of taxes!

Or it could be reason #4, Dr. Reich—it could be that world oil production has peaked (the peak came in 2005-2006) while demand continues to grow. Nobody’s fault, exactly, but every president since Nixon has known that the day would come when there wasn’t enough to go around. And every president since Carter has avoided the issue because when it comes to energy use, one cannot talk to Americans as you would to, well, adults.

I don't think I implied that Carter avoided it--in fact, I think the reason he was voted out was that he was honest about the changes needed in the American Way of Life. He's been an object lesson in US politics ever since--don't step on the third rail of energy politics if you want to be re-elected.

Or it could be reason #4, Dr. Reich—it could be that world oil production has peaked (the peak came in 2005-2006) while demand continues to grow. Nobody’s fault, exactly, but every president since Nixon has known that the day would come when there wasn’t enough to go around. And every president since Carter has avoided the issue because when it comes to energy use, one cannot talk to Americans as you would to, well, adults.

I'm assuming you meant every president AFTER Carter. He was the one, after all, who was laughed off the stage of U.S. politics for calling the energy challenge the "moral equivalent of war." Well, now we have the military equivalent. Maybe we wouldn't have had, if we'd dealt with this issue seriously thirty years ago.

Yes, we're definitely past 'peak oil', so from that point forward there will be increasing competition for a decreasing resource! The wars for oil will become more frequent and vicious.

To lower you prices of gasoline:- by 50% or more -- Carpool (two people in a car, instead of one, is like doubling your MPG)- by 10 to 25% -- Drive more carefully; accelerate more gradually, brake less (coast to red traffic lights), keep to the speed limit- by 10 t0 20% -- Get your car tuned up and keep it in good working order.- by 100% -- Eliminate unnecessary trips.- Replace your SUV/SAV ('suburban assault vehicle'!) with a fuel efficient car, bicycle, or new pair of sneakers. - Leave the suburbs for places served by mass transit.- Read "Hot, Flat, and Crowded"!!!!

Could it be the case that the push for reduced tax rates for corporations has something to do with dollars being stuck in countries where the tax has been avoided at a time when some investment in America may have a much higher rate of return. I feel terrible for those in such a predicament!

The (mass) news media role in this is highly significant,too. I'm not sure of the exact date that Rep. Boehner told Republicans to play on their constituents' anger, but my local newspaper, the Allentown Morning Call had a large and colorful spread on page one on February 14, titles "Pain at the Gas Pump on the Way." the NEXT day: "Frustration Growing with Higher Gas Prices," in which the paper aired a number of "reader's comments." These were followedon the 20th with two letters to the editor, one attributing the rise in gas prices to Obama, the other assuring people Obama's re-election means the price rise will be checked.... And on it goes!

The other BIG reason which Robert Reich must be aware of is the threatened war against Iran and the resulting interruption of oil flows from possibly several sources in the middle east. If Russia loaned Iran three nuclear bombs today the war talk would stop and the price of oil would drop.

Midwest Tom makes an interesting point, one that used to be parleyed by John David Singer, a strategic theorist. This is that nuclear weapons have no military application and can only be used to deter. Today, with the possibility of a suicide bomber detonating a small one for religious reasons (or unaware that he/she was carrying one and it was set off by remote control), Singer's point must be reconsidered. I do believe that if a number of countries had 2nd strike capability in the Middle East, leaders in the region would grow up quite quickly and begin negotiating seriously the dilemmas that cause all of the fantasy conflicts in the region. Israel does not want any country in the region to curtail its "escalation dominance" at conventional force levels. Iran very likely wishes to constrain Israel by balancing the nuclear equation. But getting to a Middle East with several invulnerable nuclear powers would be a very difficult and frightening process. But who really believes that Iran and others will permanently forgo nuclear status as long as Israel has its own nuclear weapons. Back to the balance of terror and higher gas prices. Maybe the Bam-Bam of Hebron, the Chief Alim of al-Ahzar, and the Ayatollah Khameini could hold a meeting at the Vatican and work things out (or attend kindergarten).

Well the speculators are betting on war. And war we might have to everyone's loss. Israel will have to to nuke the Iranian structures and Pakistan will nuke Israel in retaliation. The generals in Egypt will think they can easily move against the the annihilated Israel and then the dying really starts. Won't be much left to pick over in the region. Oil carries misery.

DEMOCRATS ARE EVIL . PROOF - THE DEMOCRATICALLY CONTROLLED HOUSE AND SENATE GAVE THE STUPID REPUBLICAN PRESIDENT THE TARP BILL- Robbing the average tax payer to bail out their low friends in high banking places.

Stop being a single minded sycophant. As Lincoln Observed about the Civil War. Both sides claim God as their ally at least one and probably both must be wrong.

Heaven forbid we discuss the reality that the USA EXPORTS gasoline to countries where it sells higher than here. Mandate that all distillates produced in America STAY in America, and you'll have lower gas prices. But the other truth is we NEED higher gas prices to drive implementation of higher MPG autos and alternative fuels for the future. There is a reason the average MPG for vehicles in Europe is almost 3X what ours is, their gas prices are more than double what we pay...

Thank you for stating the obvious--we NEED higher gas prices to get these oil-guzzling Amerikans awake to the fact that this can't go on forever and they have no divine right to low gas prices at the cost of irreversible climate change.

I see so many people in my neighborhood wasting so much gas just driving back and forth to their houses upwards of 4 times an hour. Wherever they are going obviously is close because they are gone only 10 minutes so they could easily walk or make just one big, round trip. Of course then they wouldn't be able to enjoy the roar coming from their unmuffled, 4-wheel drive monster pickups and their lazy children might have to learn how to walk or ride a bike to school.

True, gas in Europe is much more expensive than here... and yet Big Oil companies have a greater profit margin in this country than in Europe.

That's due to 3 things, as I understand it: far lower taxes on a gallon of gas in the US; the over-funding of our national highway system and under-funding of mass transit; and the shamefully (and artificially) low gas mileage of our vehicles relative to those in the rest of the world.

And as long as Exxon-Mobil carries so much weight in Washington, all 3 of those tragic economic realities will persist if not worsen.

"Last week House Speaker John Boehner told Republicans to take advantage of voters' looming anger over prices at the pump. On Thursday House Republicans passed a bill to expand offshore drilling and force the White House to issue a permit for the Keystone XL pipeline. The tumult prompted the Interior Department to announce on Friday expanded oil exploration in the Arctic."

Does anyone else see a pattern here? For three years, on practically every issue, the Republicans and conservatives bark and Obama caves. The president capitulates so often, I believe he's actually a conservative (in action) disguised as a liberal (in speeches). And seen this way, Obama has been the most successful conservative president we've had since Reagan... and like RR, Obama's managed to accomplish his corporatist conservative agenda without any real (or effective) opposition from the true left.

I predict that, if Obama can figure out a way to sign off on Keystone XL soon, then the GOP will, for all intents and purposes, hand him the election in November. Because really, why would any sane Republican want to mess with this setup?

I think you're right. Obama is more electable than any repug because he's somewhat believable as a human being. If he were challenged hard from the left, his whole veneer would suddenly peel away and we'd see him for what he truly is, just like how we found out what a conniving conservative Hillary Clinton was when she showed her true colors in 2008.

The repug party is dead. The least insane conservatives have already abandoned it and have infiltrated the Democratic Party. The saddest thing is that it will now be up to the electorate to challenge the Democratic Party from the left. Maybe in a few years it will do that, if it can put down that industrial-sized bag of chips long enough to go out on a limb.

It's funny he keeps refering to the "gas wars". I've been calling the first "gulf war" "OIL WAR I" for years. I KNEW there'd be another one soon, and there was. We're in the middle of OIL WAR II right now. This one will probably last until the last profitable drop has been squeezed out of the ground and global warming is a whole lot worse than it is right now.

Speculators are literally stealing from the pocketbooks of the American public. Here is a chart depicting gasoline demand from 1983 to 2011:http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M

Deliveries have dropped from approx 52 million gallons per day in '83 to 31 million gallons per day in 2011.

Gasoline contracts in play (open interest) since 2006 when the supposed recession started to rear a bit of its ugly head, jumped from the decades previous norms of 20-50,000 open interest contracts to spikes at over 300,000 contracts...and there is a world wide recession?SPECULATORS ARE ROBBING THE ENTIRE WORLDS USERS OF GASOLINE, AND CRUDE OIL AND SOY BEANS AND CORN, FOR ALL OF THOSE COMMODITIES DISPLAY THE SAME PATTERN.

In 1977, President Carter convinced the Democratic Congress to create the United States Department of Energy with the goal of conserving energy. Carter set oil and natural gas price controls, had solar hot water panels installed on the roof of the White House, had a wood stove in his living quarters, ordered the General Services Administration to turn off hot water in some federal facilities, and requested that all Christmas light decorations remain dark in 1979 and 1980. Nationwide, controls were put on thermostats in government and commercial buildings to prevent people from raising temperatures in the winter (above 65 degrees Fahrenheit = 18.33 °C) or lowering them in the summer (below 78 degrees Fahrenheit = 25.55 °C) One of the first things President Reagan did was to remove the solar panels and reverse all other controls. He enjoyed having wood burning in the fire place with the air-conditioning on. It's been all downhill since then.

This country's #1 export is gasoline. Therefore, it is not a shortage of gas that's driving up prices, it is the rhetoric surrounding Iran. And, who is ratcheting that rhetoric up? The Republicans. They are giving the speculators reasons to bid up the price of oil and oil companies to raise gas prices. Refiners do not need much to raise prices: if someone farts at one of their facilities they raise prices because a bomb went off.

When our fearless leader as policies that are economic suicide people do get upset - People from both parties and people who are not in either party.

What are some of these suicidal policies? We can't drill the Gulf, but any one else in the world can, we can't run a pipeline from our safest neighbor - so they will sell it to our closest economic competitor and ... we are still stuck where we have to by our gas from those who hate us and ship it half way round the world. The inmates are running the asylum.

your arguement, seemingly logical, misses one overriding point...ALL crude is sold on the world market so what ever is produced within the confines of North America becomes part of a pool of crude oil contracts that are bid upon by users and speculators, world wide. The US price does not change, US security does not change because we can't produce enough to make a difference. Your 'seeming logic' is straight from the voice of the neo-con right...and not based in either fact or the reality of the oil markets.

Since the supreme court seems to be having such a difficult time determining lies from free speech, perhaps it would be better to see how even truth comes out when Republican operatives like Dick Morris get done with it. See http://gasbuddy.com/gb_retail_price_chart.aspx for the six year history of gas prices (peaked in July 2008), then look at how Morris distorts it at http://www.dickmorris.com/blog/the-damage-obama-has-done/. He implies Bush left Obama with gas at $1.83, conveniently leaving out that it was a record high $4.12 just 6 months before. The gutted economy brought it down. Worse yet, Bush wouldn't even threaten to release oil from the SPR (to spoil speculation) as his friends were trying to stuff an additional 19 million barrels into the SPR at record high prices.

Even when they aren't lying, they are often telling you 3% of the story with no substantial balance. It might as well be an even better than average lie, since what they do tell you can be verified, even though it totally distracts you from the far more important and, comprehensive story.

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